Solar Tax Credit

Everything you need to know about Solar Tax Credit

What solar systems are eligible for the federal tax credit?

A complete system in place or service after January 1, 2006, and in service on or before December 31, 2021 for:
  • Residences (Existing homes and new construction qualify as well as both principal residences and second homes. Rental homes do not qualify.)
  • Businesses
  • RVs and Boats (when considered as second homes by the IRS)

Do I qualify for the solar panel tax credit?

As long as you own your solar energy system, you are eligible for the solar tax credit. If you do not have enough tax liability to claim the entire credit in one year, you can roll over the remaining credits into future years for as long as the tax credit is in effect. However, if you sign a lease or PPA with a solar installer, you are not the owner of the system, and thus you cannot receive the tax credit.

Understanding how solar panel tax credits work

The federal tax credit is for solar expenditures (including equipment and installation costs) with no upper limit. Please note that the federal solar panel tax rebate will end in 2021, and that the amount of tax credit one can receive decreases over the years.
  • 30% for systems placed in service by 12/31/2019
  • 26% for systems placed in service after 12/31/2019 and before 01/01/2021
  • 22% for systems placed in service after 12/31/2020 and before 01/01/2022
  • 0% for residential systems and 10% for commercial systems placed in service after 01/01/2022.

Applying for federal credit for solar panels

To claim the credit for residential systems, you must file IRS Form 5695 to report your expenses.
To claim the credit for commercial systems, you must file IRS Form 3468 to report your expenses.

If the federal solar tax credit exceeds tax liability, the excess amount may be carried forward to the succeeding taxable year. The excess credit may be carried forward until 2021, but it is unclear whether the unused tax credit can be carried forward after then.

**The above information is for educational purposes only and should not be construed as legal advice. Please consult a tax professional for more information.**

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Manufacturer Certification Statement 2020.pdf
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